Category: The Industry

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Improving Your Business The Industry

Competitive Telecom Marketing

Today’s guest blog is written by Mindy Jeffries of Stealth Marketing. She will be writing a series of blogs that will appear here on Fridays for a while. If you want to contact Mindy you can call her at 314 880-5570. Tell her you saw her here!

Welcome to the new world of competitive targeted marketing; a world where you put each of your current customers and potential new customers into a bucket that best describes them. This may sound complicated, but competitive targeted marketing fits easily into budgets because you just manipulate the buckets one by one. What this means is that if you can afford to market to only one bucket of customers this month, you do that.  If you can afford several buckets, then you can market to more. In order to market to all of your buckets over time you have to generate a viable telecom marketing plan.

The first step in this process is to get your customers into the various buckets. To do that you need to put yourself in your customers’ place and examine the choices every customer has sitting at home at the end of your lines. What are they evaluating each month? Since you don’t know what your customers are thinking this becomes a series of riddles as you try to get into the customer’s mindset. And you should have a solution for every riddle. If you can’t answer the riddles posed by some of your products you should be using that product yourself to see it from a customer perspective.

Here are some of those riddles, meaning the questions that your customers are probably asking:

  • How much will this cost?
  • Can I rely on their customer service?
  • What’s best for me – a local provider versus not so local?
  • Programming choices?
  • Who has the channels I love?
  • Are telephone services limited to cell only?
  • How critical is 911?
  • How is reception on the various carriers in your area?
  • What Internet speeds do I need?

As you answer these riddles from a customer perspective you have your matrix!  Now, how do you shape the marketing messaging to compete against your competitors? In order to figure out how to shape your marketing messaging, you must ask yourselves questions about your products.

For example, let’s evaluate your Internet product. How competitive are the speeds? Usually, speed is where telecom companies can be very competitive. What service has greater reliability during a storm? Which service in your area is back in service quicker after a storm? Reliability is an area that is hard to beat in telecom companies. Ask yourself the hard questions and evaluate your product honestly compared to the competition.

Telecoms own the information channels, but most of us don’t think that way. We derive messaging from the fact that we open the information channels back up quicker when you need it. Still haven’t found your marketing edge? Examine some other aspects.

  • Are there unique ideas for pricing that fit local niche markets?
  • Can you undercut the competition by bundling?
  • Packaging? Buy the fastest Internet and get phone for free?
  • Are there areas you can serve that can’t get Internet any other way, but can get video and phone other places?
  • There are lists available of phone or Internet customers by competitor as well as satellite lists. You can buy those lists and then you can mail just those specific customers with a compelling offer. Show them how you can compete!

Once you form your matrix you can put each of your customers and potential customers into a bucket. You then decide what product you are going to offer them at which compelling price and how are you going to tell them what you have to offer by which medium.

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Technology The Industry What Customers Want

Will the Real 4G Please Stand Up?

English: 4G LTE single mode modem by Samsung, ...
English: 4G LTE single mode modem by Samsung, operating in the first commercial 4G network by Telia (Photo credit: Wikipedia)

We are all aware of grade inflation where teachers give out more high grades than are deserved. But US cellular marketers have been doing the same thing to customers and have inflated the performance of their data products by calling every new development the next generation. Earlier this year the International Telecommunications Union (ITU) approved the final standards for 4G cellular data. One of the features of the final standard is that a 4G network must be able to deliver at least 100 Mbps of data to a phone in a moving vehicle and up to 1 Gbps to a stationary phone.

Meanwhile in the US we have had cellular networks marketed as 4G for several years. In the US the earliest deployments of 3G networks happened just after 2001. That technology was built to a standard that had to deliver at least 200 kbps of data, which was more than enough when we were using our flip phones to check sports scores.

But since then there have been a number of incremental improvements in the 3G technology. Improvements like switching to 64-QAM modulation and multi-carrier technologies improved 3G speeds. By 2008 3G networks were pretty reliably delivering speeds up to 3 Mbps download using these kinds of improvement. Around the rest of the world this generation of 3G improvements was generally referred to as 3.5G. But in the US the marketers started calling this 4G. It certainly was a lot faster than the original 3G, but it is still based on the 3G standard and is not close to the 4G standard.

And since then there has been other big improvements in 3G using LTE and HSPA. For example, LTE is an all-packet technology and this allows it to send voice traffic over the data network, gaining efficiency by not having to switch between voice and data. One of the biggest improvements was the introduction of MIMO (multiple input multiple output). This allows LTE to use different frequencies to send and receive data, saving it from switching back and forth between those functions as well.

For a while Wi-max looked like a third competitor to LTE, but it’s pretty obvious now in the US that LTE has won the platform battle. All of the major carriers have deployed significant amounts of LTE and most of them say these deployments will be done by the end of this year in metropolitan markets. Speeds on LTE are certainly much faster than earlier speeds using 3.5G technology. But this is still not 4G and around the rest of the world this technology is being referred to as 3.9G or Pre-4G.

But to date there are very few phones that have been deployed that use the LTE network to its fullest. There have been a few handsets, like the HTC Thunderbolt that have been designed to use the available LTE speeds. And Verizon says it will roll out smartphones in 2014 that will only work on the LTE network.

There is a big trade-off in handsets between power consumption and the ability to switch between multiple cellular technologies. A typical cell phone today needs to be able to work on 3G networks, 3.5G networks and several variations of the latest networks including the different flavors of LTE as well as the HSPA+ used by T-Mobile. So, interestingly, the most popular phones like the iPhone and the Galaxy S4 will work on LTE, but don’t come close to achieving the full speeds available with LTE. And of course, nobody tells this to customers.

Starting in September in South Korea will be a new deployment of another incremental improvement in cellular data speeds using a technology called LTE-A (LTE Advanced). This is achieving data speeds of about twice those achieved on the current US LTE deployments. This is achieved by layering in a technology called carrier aggregation (CA) that links together two different spectrums into one data path.

And the US carriers have talked about deploying the LTE-A technology starting sometime in 2014. No doubt when this is deployed in the US some marketer is going to call it 5G. And yet, it is still not up to the 4G standard. Maybe this is now 3.95G. Probably by the time somebody actually deploys a real 4G phone in the US it is going to have to be called 8G.

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Improving Your Business The Industry

Telecommunications Enters a New Marketing Era!

Today’s guest blog is written by Mindy Jeffries the President of Stealth Marketing. She will be writing a series of blogs that will appear here on Fridays for a while. If you want to contact Mindy you can call her at 314 880-5570. Tell her you saw her here!

In this blog post, my intent is to examine the history of telecommunications marketing so we can all have an appreciation of the work we have today, the products and the marketing solutions in the fast paced environment we find ourselves. From the day I started in 1978 until today, one thing is certain and that is change. So this post will provide solutions and ideas on how to make that change fun and manageable.

Cable started as a technical product that solved a problem for people in places that could not get the new invention called ‘television’.  The cable industry solved a need. Today those needs are rarely present with products that telecommunications companies market. So, what started as a technical-needs-based product became more of an everyday consumer product, and a story had to be told in an effective and compelling manner which would help new consumers choose which product fit their needs the best. This is when it got a lot more fun for marketers.  But wait, telecom companies had no marketers!

Telecom began to get more competitive and a need emerged to tell the ‘how are we different?’ story in an increasingly compelling way. Competitors came in on the television side, on the phone side, and on the Internet side. All of a sudden, telecom companies had competitors emerging at every door.

In the early days of cable television we told the story through products. HBO, ESPN, and other similar companies would help pay for the marketing. Our competitors started marketing with those same brand names. Cruel. Products became ubiquitous, available through all competitors. Those premium product offerings were no longer a differentiator.

Of course, a few other things happened in the world of marketing in the last 30 years. A truckload of marketing options started to become available to us. The marketing industry was introduced to new technology, new research entities, new methods, new philosophies, etc. In the end, that yielded options, more than one way to skin a cat. More marketing options means more places to spend your money with a lot of variation in response rates to different audiences with different marketing methods.  Sophisticated, targeted, analytical marketing became very important.

The problem became: how do we effectively differentiate in a quickly emerging telecom world . . . how do we tell our story, what is the target market, who is the target demo and what is the best way to place that communication? How do we utilize all of these marketing innovations? Those are the questions we will answer over the next few weeks. Hopefully these blogs will explain the process behind the curtain and I hope to show you the processes and strategies behind effective marketing.

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Current News The Industry

The Future of TV

Kicking Television (Photo credit: dhammza)

Laura Martin and Dan Medina of Needham & Company, a branch of an investment banking and asset management firm have issued an analysis on  the Future of TV. There has been a lot of other reporting about this report, most of which zeroed in on the fact that ESPN would need to charge $30 in an a la carte environment. I’ve written several other blogs about the a la carte issue and instead want to highlight some of the interesting facts from the report.

They say that TV is a bargain and that the average family spends 30 cents per hour to watch TV. This is based upon an average cost of $75 for a cable subscription and a family watching TV eight hours per day. I think they miss two points with this. The price of cable has grown much faster than inflation and there are now more and more homes who feel they can’t afford the cost of the subscription. If cable rates keep climbing 6% per year, in only five years this same subscription is going to cost over $100 per month. Also, there are many households who do not watch TV eight hours per day. It is these two groups that are leaving the cable system, the first reluctantly and the second because it no longer feels like a bargain.

TV content is expensive to produce. The four main broadcast networks (ABC, CBS, FOX and NBC) spend an average of $2.5 million to create a prime time hour of programming. To contrast, all of the other 130 or so cable networks spend an average of about $100,000 per hour. But there are new rivals now producing programming. There are a number of companies now producing content for the web and this is expected to grow rapidly. For example, YouTube is spending about $100 million, NetFlix $200 million, Hulu $500 million. And both AOL and Yahoo have created web ‘channels’.

They say that about 80% of content never pays for itself. The TV world is driven by hits since they draw the bulk of the advertising revenue. But hits are ephemeral and unpredictable. The broadcast networks have been geared for decades to product hits and it’s obvious that even with the money that they spend that it’s very hard to do. But the top shows garner the lion’s share of ad revenues. To show the power of hits, the top 1% of movie hits account for 18% of movie rentals / views.

They recognize that TV viewing is shifting in a digital age. They cite the following statistics:

  • 72% of viewers watch content only on a TV set.
  • 11% watch content only on some digital medium such as computer, pad or smartphone.
  • 17% of viewers watch some content in both ways.
  • 61% of TV watchers now use the Internet while watching TV and 10 – 25% of those viewers go to the website of the show being watched (depends upon the network being watched).
  • 29% of the viewers who use the web while watching TV are on Facebook.

The report estimates that over 1 million jobs are dependent upon the TV sector. These are mostly middle class jobs and include cable TV installers, customer service reps, people who work in various roles at the networks. Comcast alone has 126,000 employees. By contrast the new companies trying to make money from web content have very few employees. Hulu has 420 employees, YouTube has 650 and NetFlix has 2,348. The report thinks that most of the traditional cable TV jobs are at risk if we move to an a la carte system.

The public companies in the TV sector have about $400 billion in market cap (investable securities). The report estimates that at least half of that market cap would disappear under a la carte programming. They warn that even having the government looking at a la carte programming puts these investments at risk.

These are just a few of the many facts cited in the report, which is why I have included link to the full report for anybody who wants to read more. Oh, and at the end of the report they recommend buying CBS and AOL stock. If you buy them and it doesn’t work out, you didn’t hear it here.

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Regulation - What is it Good For? The Industry

Spectrum Winners and Losers

AT&T posted a short statement on their public policy blog called ‘Inconvenient Facts and the FCC’s Flawed Spectrum Screen’. In that blog post they complained that the FCC had failed to apply the spectrum screen to Softbank’s acquisition of Sprint and Sprint’s acquisition of the rest of Clearwire. And AT&T is right. The FCC has been incredibly inconsistent in the way it looks at wireless acquisition and mergers.

So what is the spectrum screen? The spectrum screen is a set of internal rules at the FCC that they use to determine if any wireless carrier owns too much spectrum in a given market. Historically the FCC had a generic rule that said that no one company could own more than one-third of the spectrum usable for wireless in a given geographic area. This spectrum screen was applied both to attempts of wireless carriers to buy new spectrum or to mergers between wireless carriers.

The FCC has been very inconsistent in the way they apply the existing screen. Last September they announced that they were going to look at the way the spectrum screen ought to work. But meanwhile, during the last year the screen has been applied (or ignored) in the following ways:

  • When the FCC looked at the proposed AT&T / T-Mobile merger they rejected the merger in part because they said that the acquisition would fail the screen test in 274 CMAs that covered 71 of the top 100 markets and 66% of the US population. However, the FCC fudged the spectrum screen in coming up with those numbers. At that time the spectrum screen set the maximum amount that any one carrier could own in one market at 95 MHz, which was one-third of the spectrum available for wireless carriers. However, in coming up with their conclusion the FCC lowered that threshold to 90 MHz in judging the merger. That might not sound like a big difference, but it lowered the number of markets affected by the merger by 84 and reduced the overall problem to less than 50% of the top 100 markets and 50% of the US population. That is still a lot of places where the proposed merger would have failed the spectrum screen, but AT&T had announced plans to divest of bandwidth as needed to meet the FCC test. The FCC made this change in the spectrum screen without any public input.
  • When Verizon acquired spectrum in the 1.7 to 2.1 GHz band the FCC applied this fully to their spectrum screen band. They did the same when AT&T acquired 2.3 GHz spectrum.
  • And then there is the recently announced approval for Softbank to acquire Sprint and Clearwire spectrum. The Clearwire spectrum at 2.5 GHz is right next to the 2.3 GHz spectrum recently acquired by AT&T. While the FCC fully counted the spectrum AT&T purchased against the spectrum screen, in the Softbank acquisition the FCC counted only 55.5 MHz of the Clearwire spectrum against the new Softbank spectrum screen even though there is an average of 140 MHz available in most of the Softbank markets.

So AT&T has a legitimate gripe. The FCC seems to apply the spectrum screen to get the results they want. It looks a lot more like the FCC is picking market winners and losers than they are protecting the public. The spectrum screen was established in the first place to promote competition. The FCC wanted to make sure that a given carrier did not get so much spectrum in a major market that they could effectively close out competition. They also didn’t want carriers to be able to hoard spectrum for future use. But the FCC no longer seems to be using market protection as the criteria of deciding who can and cannot merge.

It’s clear that the FCC didn’t want AT&T and T-Mobile to merge. They thought that it was bad for competition to lose one of the major carriers in the country. But it was wrong for them to fudge the spectrum screen as a way to justify their position rather than just oppose the merger on pure competitive grounds.

And in the case of Softbank they are going in the opposite direction. They obviously want a new competitor to AT&T and Verizon and they are ignoring the spectrum screen to make sure that happens.

Why does all of this matter? Like anything else it’s a matter of money. Wireless carriers have two ways that they can address congested conditions. They can just add more cell sites, closer and closer to the old ones. In effect spectrum is reusable and each new cell site uses the original spectrum freshly. The other solution is to just layer on a new spectrum in a crowded area so that no new cell sites need to be constructed. That is much cheaper than building cell sites, and so carriers want more and different spectrum in major markets to meet the seemingly insatiable and rapidly growing demand for mobile data.

The issue is going to get a lot worse. President Obama announced a new policy that will release up to 500 MHz of new spectrum for wireless use over the next five years. So there is going to be a new land grab by all of the carriers and the FCC needs to get ready.

It just seems to me like the FCC needs to toss out the spectrum screen and come up with a new way to determine the right amount of competition. In the two biggest merger cases before them in the last few years they blatantly ignored their own spectrum screen rules to get the result they wanted. That is evidence enough that we need to stop having the fiction of a spectrum screen. If the FCC wants to be in the game of picking market winners and losers they just need to be upfront about it.

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Current News The Industry

The National Broadband Map

Seal of the United States Federal Communications Commission. (Photo credit: Wikipedia)

Last Thursday the FCC voted to take over the data collection for the National Broadband Map. The Map was created as part of the funding for broadband supplied a few years ago by the Stimulus package. The Map was created and administered by the NTIA (National Telecommunications and Information Administration) with input from the states, and that funding is now running out.

Back when the Map was suggested I thought the concept was a good one. But as soon I saw that the data gathered for the Map was to be self-reported by carriers I knew that there were going to be problems. And sure enough, when the first generation Map was produced it was full of errors – big errors.

I work with a lot of rural communities and I have reviewed the maps in many areas of the country and compared it to the actual deployment of broadband. Some communities have developed their own maps – and they did it the hard way. They sent people around to see where broadband was available. A lot of this can be done by somebody who knows how to look up at the cables. It’s easy to know where cable modems are available by the presence of coaxial cable on the poles. And rural DSL generally has repeaters that can be spotted by the eagle-eyed observer. And it’s not hard to look at your cell phone to see how many bars of data you can get. But the best test of where broadband is at is done by knocking on doors and asking people what they are able to buy.

As an example of what I found, let me talk about the issues found in just one county in Minnesota. The Map showed that most of the County had landline broadband availability. The County is very typical of rural areas and the County Seat is the largest town in the County. There are half a dozen much smaller towns and everything else is rural. A large chunk of the rural area is a national forest where very few people live. Most people live in close proximity of the roads in the rural areas.

The reality in this County is that even in the several of the smaller towns the DSL is so slow that it is hard to think of it as broadband. It’s more like dial-up plus. And there was no cable modem service from the cable company outside of the County Seat. And as is typical with DSL, as one goes outside of the towns the quality of the DSL quickly degrades with distance from the DSL hub. We’ve always called this the donut effect with large areas of no broadband surrounding rural towns that have DSL and/or cable modems.

The Map also showed that almost every populated area of this Minnesota County had 3G wireless data available. It’s a very hilly and rugged place and probably half of the county by area can’t even get cellular voice calls, let alone data. But even where voice is available there are many areas that can’t get cellular data. The Map was just wrong about this.

Everywhere that I have helped communities look at the Map we have seen the same thing. The Map shows broadband that isn’t there. It shows cellular data coverage that isn’t there. And it often shows providers that are supposedly serving the counties that nobody ever heard of.

And this is not true for just rural counties. I have helped two suburban counties near large cities look at the Map and they found the same situation. The Map showed areas that are supposed to have broadband where their citizens still have dial-up or satellite. And cellular coverage was exaggerated on the Map.

An obvious question is why this matters? The national Broadband Map has only been around for only a few years and anybody who has ever looked at it knows it us full of inaccuracies. The problem is that the federal government now relies on the Map for several purposes. For instance, if you want to get federal money by loan or grant to deploy rural broadband the assumption is that the Map is good. It is then your responsibility to show where the map is wrong.

And the FCC uses the Map when it talks about the availability of Broadband in rural America. The Map has been overlaid with Census data to count how many households can get broadband. This produces a very distorted picture of who has broadband. There are pockets of people without broadband in even some of the most populated counties in the country and the Map simply misses them. And in rural areas the Map can be very wrong.

The FCC just took over responsibility for the Map. From my perspective they either need to do it right or get out of the mapping business. It’s not easy to get it right, but it can be done. One of the easiest steps they could take would be to give counties the authority to clean up the maps for their areas. Many of them would be glad to do that. And broadband availability is not static. There are areas all of the time getting or losing broadband. If the FCC won’t take the time to get the Map right they should just let it die as another impractical idea.

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The Industry What Customers Want

Should You Carry OTT Programming?

Every cable provider today needs to consider carrying Over-the-Top (OTT) channels on their cable system. OTT programming is content that is available on the web and includes such things as Hulu and Netflix. There are a number of reasons to consider this:

  • I have discussed the phenomenon of cord-cutters in other blog posts. The large organizations that track cable customers report that a lot of customers are dropping traditional cable. Nielson reported that at least one million people dropped traditional cable last year and that number is expected to increase. The cable industry appears to be at the same place that the telephone industry was ten years ago and everybody expects more and more people to drop cable TV every year much as has happened to land line telephones. To the extent that you can give customers easy access to OTT programming on your cable system you may convince some of them not to leave your system.
  • There are a lot of customers buying OTT boxes, which are devices that let them watch OTT programming on their TVs and also on other devices using WiFi such as pads and smartphones. These are devices like Apple TV, Roku, Boxee and Playstation.  Once a customer has an alternative box in their home sitting next to your settop box they have mentally started the process of dropping you. If you can give customers easy access to the OTT programming they want you will have lowered their incentive to buy an alternate box.
  • You can use OTT programming to develop new products. Nobody makes much money today with cable TV. You can create a new bundle of programming by combining OTT, the basic network channels and local programming that can be more profitable than the large packages you sell of many channels. I will discuss this more below.

There are a number of ways to get OTT programming onto your cable system. You can gather the OTT program sources yourself and put them onto open channels on your system. There are devices available that will let you create a channel out of web content. For instance, you can create a channel that would have buttons for the most popular web content.

But an easier way is to use somebody who has already done that aggregation. There are several vendors who have packaged OTT channels together to make a ‘channel line-up’. Probably the best of these right now is a company called AIOTV (All-in-One TV). This is available on the web to anybody, but they also have a version of their programming that is designed to be used as a web channel.

AIOTV will supply the feed to you for free to get onto your cable system. They sell nationwide advertising and they insert ads at the beginning of each show that a customer watches. If you put them onto your cable system they will send you a small revenue sharing check each month for carrying their ads. It’s not a lot, and the revenue is not the primary reason to do this, but it’s still nice to get a check.

The other nice feature of AIOTV is that their platform gives you an easy way to create additional web channels of your own. There innumerable ways for you to use this capability and you could add additional web content to your line-up that is not already on AIOTV. However, the best use of this capability is to use it to create local programming. You can use AIOTV or other platforms to create a channel for every school, church, non-profit or other entity in your area. The programming would be up to the entities who have channels and they can use it to put items of interest to your community onto your cable system. For example, this is the easiest and lowest cost way to get things like little league games and high-school sports onto your network.

With AIOTV or some similar provider you can create some sense out of local programming. The platform gives you a way to create a traditional looking channel line-up so that people can find the local channels they want. Each local channel supplier also has the ability to operate their channel so that it is continuous feed or on-demand.

Local programming is a way to get and keep customers on your cable network. Other communities that broadcast a lot of local content say that this becomes one of the more popular things on their network. People want to watch local sports and graduation ceremonies and other local events. Most cable systems today carry local city-council meetings, but there is a lot more events of local interest in every community.

Finally, you can use OTT and local programming to create a new product. For example, every cable provider has a basic product that consists of the broadcast networks such as ABC and NBC along with a few other channels. You can create a pretty robust package that includes your basic line-up, OTT programming and local programming. Priced at something like $20 per month this would be the most profitable product on your cable system. Today most companies are lucky if they break even with the larger cable packages after paying for all of the programming.

This kind of line-up offers customers a ton of programming including web access to many of the most popular shows they watched on traditional cable. I have anecdotally spoken to several people who have dropped traditional cable for a Roku or Apple TV box and they say that they don’t feel like they have suffered any big drop-off in options. If you can add live network TV and local programming to this mix you have a robust line-up that many of your customers are going to see as an attractive alternative.

I think that cable systems are on the verge of pricing a lot of customers out of being able to afford their services. Expanded basic packages are now $60 to $70 per month in most markets and continue to increase in price every year. So consider a preemptive strike and give your customers a pre-packaged lower cost alternative rather than waiting on them to go find this on their own.

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Current News The Industry

The Last Telephone Monopoly

English: Concertina razor wire at a prison (Photo credit: Wikipedia)

There is still one last monopoly in the telephone world and that is for rates charged in many of the prisons and jails in the US. Some of the rates charged to prisoners for making a call are extremely high as will be shown below.

The prison calling industry has changed a lot over the last thirty years. Thirty years ago most of the calling from prisons was handled by the telephone companies, and for the most part inmates had to go through live operators and make collect calls. But over the years the prisons and jails have required a number of special features, referred to as penological features, that allow them to monitor and control inmate calling. These various penological features have forced the industry to shift to specialty providers who have developed solutions that deliver the needed penological features. So today there are a handful of prison telephone providers who each serve large numbers of facilities – companies like Securus, Global Tel-Link, ICS and FSH Communications.

I call this a monopoly market because at each jail or prison there is only one service provider. Generally the service providers compete to serve a facility through an RFP process, so one would assume that the calling rates would be competitively set. But just the opposite occurs. In most states the telephone service providers are required to pay a commission back to the prisons for each call billed. Over the years these commissions have increased and there are some commissions as high as 60%, although most are more in the range of 30% to 40% of the billings. The RFP generally seems to get awarded to the carrier that will offer the highest kickback to the prisons.

This Table of Prison Rates is a summary from a magazine called Prison Legal Review from 2011 that summarizes the rates in each state. The rates don’t change much over time so this ought to still be fairly accurate. As you can see, rates vary widely by state and also by jurisdiction. The lowest rates are in New York where rates for all jurisdictions are a flat 4.8¢ per minute and the highest rate is in Washington state where an interstate call has a $4.95 setup fee plus 89¢ per minute.

You can see from this table that the intrastate rates in most states are lower than the interstate rates because the state commissions in most states have set a cap on the prices that can be charged for prison calling. But most of those rates were set in a different time in the past where a lot of the calls from the prisons required a live operator. Today very few calls require an operator and most prisons offer both collect and pre-paid calling to prisons which are both totally automated. Other states have set prison calling rates to be the same as payphone rates since the phones in a prison resemble a payphone in technology (although none of them allow for coins to be used to pay for calling).

The prison service providers are obviously making a lot of money on the calls with high rates. If there are service providers willing to bid on the business in a state like New York or other states where the calling rates are relatively low, then these same providers are obviously making a huge margin per call in states where the rates are high, even after paying commissions.

One might ask why it matters what the rates are in prisons and I think there are several reasons:

  • Studies have shown that allowing prisoners to keep in contact with family is an important aspect to rehabilitation and of them not returning to prison. The high rates make it very difficult for most prisoners to keep in regular contact with the outside world. The real victims of high calling rates are the families of inmates. It only takes a few short calls at the rates shown in the table to hit a $100 monthly bill for calling. Many families are forced to severely limit calling due to the cost.
  • The high rates make it very hard for prisoners to stay in contact with their lawyers, for the same reason of cost.
  • It just feels wrong to have a niche of the market where a carrier can land a deal that allows it to charge a huge set-up fee and 89¢ per minute. And the whole system of commission kickbacks feels wrong. This is not analogous to having high rates for public payphones because the public can choose to avoid payphones. But if an inmate wants to call they have no option but to go through the monopoly provider at their prison.

There does not seem to be much momentum to change things. Prisons are very happy with the commission kickbacks. It’s a source of revenue outside of what they are funded by the states or federal government. Very few state commissions seem to be concerned enough about the issue to accept dockets that examine the issue. There has been an open docket at the FCC for many years that has never been decided.

But I think everybody in the industry understands that cost of long distance calling has fallen through the basement. Wholesale long distance can be purchased for a penny or two at most per minute, and it’s obvious by the prison rates in New York that the penological requirements can be met for a relatively low amount per minute. And so anything over the New York rates are simply the last abuse of a monopoly power that has been broken for every other kind of calling.

Categories
Technology The Industry

What Happened to the Digital Divide?

Internet Access Here Sign (Photo credit: Steve Rhode)

There was hardly a time in the late 90’s and early 00’s when broadband was discussed that the topic of digital divide was not mentioned. Government entities, policy people and even service providers talked about solving the digital divide to make sure that everybody had access to the Internet. There were committees and commissions formed in many communities to help solve the digital divide and to make sure that every child had a computer and an internet connection.

From what I can see the topic has disappeared from discussion and I rarely seeing the topic discussed any more. Does this mean that the digital divide has been solved? Certainly there are a lot more households with Internet access today than a decade ago, but do the poorest households now subscribe to the Internet?

Before one can even answer the question we need to define what broadband is. The FCC defines broadband as the ability to get a landline service with a download speed of at least 4 Mbps and an upload speed of 1 Mbps. In most markets that is one of the lower-speed products available and speeds in metropolitan and suburban areas are now much faster than that. According the numbers released by the FCC in August of 2012 there were 19 million people in the US with no access to broadband and another 100 million with access to broadband but who do not purchase it. But there are many who dispute the way that the FCC counted the 19 million figure and think that the real number is much larger.

Another way to look at the market is by households and the Leichtman Research Group did a study in 2012 that showed that there are almost 81 million homes with broadband, or just at 70% of all households. That same study said that broadband penetration rates in homes with average household incomes under $30,000 had only a 52% broadband penetration rate while homes with incomes over $50,000 had a 97% penetration rate. Obviously there are a lot of households who feel they cannot afford broadband.

Today one has to ask if landline broadband is the only kind of broadband. For example comscore reports that 133 million people owned smartphones as of February 2013, or 57% of everybody over 13 years old. Certainly there are many people whose only Internet access is with a smartphone.

A Pew Research Center study released a study earlier this year of the Internet usage of teenagers between 12 and 17. This group uses the Internet more than any other age group and 95% of teenagers access the Internet at least one per month. But 25% of teenagers only have a smartphone to use for Internet access. One has to question if smartphone usage is really broadband. Certainly you can read news, update Facebook and play games on a smartphone. But it’s sheer torture to use a smartphone to write something even as long as this blog and it’s hard to see smartphones being a broadband substitute for school kids trying to do various types of homework. The smartphone wasn’t really designed to handle files in the same way as a laptop or computer.

One thing that is clear in the figures is that the lower the income the less likelihood that a household will find broadband to be affordable. And to me that says that we still have the digital divide. But for some reason, nobody is talking about it anymore.

One statistic that I found interesting is that the Leichtman report said that 90% of households with computers have broadband. When you compare that to the statistics that say that only 52% of households with household incomes under $30,000 have broadband it is also easy to say that an awful lot of those homes don’t have computers.

I remember a decade ago there were major programs developed to get computers into households, particularly households with children. I just did a Google search and found a few such programs are still active, like one in Chicago, but getting computers into homes was a major focus for my clients and the country as a whole a decade ago. And that seems to have basically dwindled away as a priority.

I don’t know the reasons for this, but I can postulate. Broadband access seems to be ubiquitous in middle class neighborhoods and it is now the rare house that doesn’t have a computer and Internet access. Perhaps everybody just assumes that this is now true everywhere, while it is not. If the FCC numbers are to be believed there are still 119 million people without Internet access. Back the babies out of that number and there are still a whole lot of people without broadband.

It seems to me that the digital divide hasn’t gone away at all. We have just stopped talking or caring about it. Maybe it’s time to put this back on the agenda.

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Improving Your Business Regulation - What is it Good For? The Industry

It’s Still a Regulated World

It seems like every few weeks I have a conversation with a carrier and in the course of conversation I find out that they are not in compliance with some regulation or another. It seems like a lot of companies that sell VoIP services, in particular, think that somehow that makes them immune from regulation.

But regulation has not gone away. If you bill an end-user customer for a voice, data or video product then there are regulations that you have to comply with. If you are an ISP for other entities, even if those entities are large, you are subject to some regulation. The only category of carrier that might not be subject to regulation is what I call a carrier’s carrier, and who only serves other carriers as customers. And in some states even they are subject to regulation.

It matters that you follow the rules. It seems like regulators at both the state and the federal level are getting surly about offenders and there some big fines being handed down to carriers who ignore regulation. I think the cost of compliance is cheaper than the cost of getting caught.

Here is a sample of the kinds of federal regulations that we see carriers ignoring. There are other state requirements that are also being ignored:

  • CALEA. There are significant obligations to be read to immediately give access of your customer’s voice and data records to law enforcement. You must have a manual filed that describes the processes.
  • CPNI / Privacy. You must have a manual and processes describing how you will protect your customers’ privacy.
  • Red Flag. You must have a manual and processes in place to demonstrate how you will protect your customers from identity theft.
  • Net Neutrality. There is very specific information about your company, your products, your network and your technology that you must inform customers about.
  • 21st Century Communications Video Accessibility Act. You must file a plan on how you will help disabled customers get access to voice, video and data products.
  • Universal Service Contributions. We find carriers that should be contributing to the USF fund who are not. The fines for getting caught for this can be huge.

I told my readers that I wasn’t going to write too many blog entries that are direct sales pitches for CCG services. I will admit that many of my blogs hint at the services we offer, but the main intentions of these blogs is to discuss issues for carriers that I think they will find to be useful. But in many cases CCG is able to help clients with a lot of the topics discussed in my blog.

CCG has three regulatory products that make it easy for anybody to stay in compliance with the rules. We have many clients who use CCG as their regulatory arm and many have said that it’s far cheaper to use us than to do it themselves. Here are the three products you ought to consider if you want to hand make sure that you are in compliance with the regulatory side of the business.

Regulatory Assessment. We will do a one-time assessment of your business and tell you every regulation that we think applies to you. Why guess if you are in compliance. For a modest fee we will make a list.

Regulatory Compliance Monitoring Service. In this service we develop a calendar for your company and we remind you of every regulatory deadline you must meet during the year.

Regulatory Compliance Filing Service. If you want it, we can create all of the needed paperwork and manuals, fill out the quarterly and annual forms and file everything for you. We think we have some of the best prices in the market for this kind of work.

If you want help to get into regulatory compliance or stay incompliance, give Terri Firestein of CCG a call at (301) 788-6889. We can help you take regulatory worries off your plate.

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